Gazprom

Previous Updates

2 June 2009

Statement on the working meeting between Alexey Miller and Oleg Dubina

Statement on the working meeting between Alexey Miller and Oleg Dubina

Gazprom’s Headquarters hosted today a working meeting between Alexey Miller, Chairman of the Company’s Management Committee and Oleg Dubina, Chairman of the Board of Naftogaz Ukrainy.

The parties discussed the implementation of long-term gas supply and transit contracts. In particular, parties discussed the issue of payment by the Ukrainian side for the current gas supplies as well as the need to fill underground gas storage facilities by Naftogaz Ukrainy to fulfill its supply and transit of gas obligations in 2009-2010 heating season.

Following the meeting, Alexey Miller said that “It is as yet unclear whether Naftogaz of Ukraine could be able to pay in full and on time for gas supplied in May. The payment, as everybody knows, should be made by June 7”.

He added that it was impossible to talk about the disconnection of Ukraine from gas supplies after Naftogaz signed a ten-year contract with Gazprom. “Even if it comes to the switch to advance payments [for gas], Naftogaz will decide itself how much gas it needs. They will get as much as they pay for. There's no question of cut-offs," he said.

Background:

On January 19, 2009 JSC Gazprom and Naftogaz Ukrainy signed two separate long-term contracts to transit Russian gas to Europe through the Ukraine and supply gas to Ukrainian consumers. The contracts are valid from 2009 until 2019 inclusively.

The transit contract allows the retention in 2009 of a privileged transit fee of $1.7 for transiting 1000 cubic meters of gas per 100km. As of January 1, 2010 the transit fee will become a market rate and will be calculated by the conventional European formula.

According to the agreement to supply gas to Ukraine, the price of the gas for the Ukrainian users is calculated by the conventional European price formula with a reduction coefficient of 0.8. The price is changing every quarter. As of January 1, 2010 Gazprom will begin selling gas to Ukraine according to a market-based European price without any reductions.

26 May 2009

Statement by Gazprom on Ukraine’s gas payment difficulties

Statement by Gazprom on Ukraine’s gas payment difficulties

Moscow, May 26, 2009

Following a working meeting with Naftogaz Ukrainy CEO Oleg Dubina on the payment for Russian gas deliveries in Moscow yesterday, Alexei Miller, Gazprom Gazprom Management Committee Chairman, said the following:

“We consider the payment situation for Russian gas supplies to Ukraine in May as very, very serious. If there is a disruption with Ukraine’s payments, Gazprom has the legal right to switch to a 100% prepayment scheme.”

Sergei Kupriyanov, Gazprom spokesperson, added: “The key issue at this moment is the timely and full payment for Russian gas, including the gas that Ukraine needs to replenish its underground storages. The information presented to Gazprom during the meeting showed the dire financial state of the Ukrainian company and once again confirmed that the questions arising with regard to Ukraine’s ability to pay for supplied Russian gas are well-founded. Naftogaz Ukrainy is finding it enormously difficult to pay its bill for May.

It should not be forgotten that Gazprom is a commercial company working with Naftogaz Ukrainy on the basis of commercial agreements and therefore has every reason to act in accordance with these agreements. This means if the Ukrainians are unable to pay for the supplied gas, Gazprom may automatically implement a 100% advance payment requirement in the future.

The Gazprom Group fully understands the importance of this problem for Europe’s energy security and is already showing maximum goodwill by doing everything it can to prevent another crisis . This year Gazprom already allowed Ukraine to receive payment for transit in advance, and decided not to impose penalties on Naftogaz for violating the terms of the agreement from January-April with regard to the minimum volume of gas purchased.

For this reason, not only Gazprom, but also its European partner companies must take a keen interest in preventing financial difficulties of the Ukrainian company. This is a concern for Russia as well as the EU and its member states, since the reliability of gas supply from Russia and Europe’s energy security are at stake.

In this situation we are hoping that the EU bodies will assume some responsibility for the situation rather than sidestep the possible difficulties as it did during the transit crisis that arose in Ukraine in early January 2009. We need to actively search for ways to work together to solve this problem.

This latest critical situation with Ukraine confirms once again the urgency of diversifying gas transit routes. The construction of new gas pipelines (Nord Stream, South Stream) will significantly reduce transit risks while reinforcing Russia as a reliable supplier in the interests of all parties—suppliers, customers and end consumers. The EU must act decisively to facilitate the completion of these projects.”

Background:

Naftogaz Ukrainy was only able to pay one-third of the amount it owes for the month of April. In order to allow the Ukrainian company to pay the entire price of the supplied gas, the Gazprom Group made an additional advance payment for the transit of gas through Ukraine which covered Naftogaz’s bill for the month of April. Taking into account the advance payment made in January in the amount of $1.7 billion, Gazprom has now paid for the transit of gas through Ukraine in 2009 in full. The limit on this year’s advance payments has been exhausted.

What makes the situation more difficult now is that from January-April the Ukrainian company sold significantly more gas to domestic consumers than it had bought from Gazprom by drawing gas from its underground storages. Due to the seasonal peculiarities of the market, gas consumption will fall this summer, and payments to the supplier—Naftogaz Ukrainy—will fall along with them. Naftogaz will see its income falling while its expenses will be rising.

In addition to the current supply Naftogaz will have to buy and pump about 19 bcm of gas into the storages in order to prepare for the winter. This gas will not only be for domestic consumption within Ukraine but also for the fulfilment of the Ukrainian company’s obligations to transport Russian gas to Europe.

Ukraine’s underground gas storages were nearly emptied in early January, when Ukraine was drawing a minimal amount of (at that time) more expensive Russian gas. Replenishing the storages is a key concern both for domestic consumption this coming winter and in guaranteeing gas transit to Europe.

Taking into account Ukraine’s near-monopoly position in the transit of natural gas from Russia to Europe, the repercussions of Naftogaz’s financial problems are clearly not limited only to Naftogaz and its shareholder—the Ukrainian state but Europe as a whole.

4 March 2009

Gazprom hopes that developments in the central office of Naftogaz won't affect February gas payments

Gazprom hopes that developments in the central office of Naftogaz won't affect February gas payments

"We are concerned about today’s situation in regards to SBU’s investigative actions in the central office of NAK Naftogaz Ukraine. We hope that these developments will not affect the full and timely payment by Naftogaz Ukrainy for February supplies of Russian gas to Ukraine.”

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20 January 2009

Gazprom's Deputy CEO Alexander Medvedev gives details on agreements with Ukraine

Speaking to journalists during a conference call today Gazprom's Deputy CEO Alexander Medvedev confirmed that contracts had been signed with Ukraine for both the supply of gas to the Ukraine and transit of Russian gas to Europe:

—The signing of the contracts, both of which cover 10-year terms, is a major achievement.

—2009 is the last year of discounted prices for natural gas as well as special transit rate for transit via Ukraine. In 2010, Ukraine will pay European prices for supply and Gazprom will pay European prices for transit.

—Assuming Ukraine's future compliance with the contracts, there should never be a repeat of this winter's situation (interruption of transit supplies to Europe). Both contracts contain internal mechanisms to prevent non-compliance, including a clause covering advance payment in the event of lack of payment by Ukraine for the gas it receives.

—Today, in accordance with the agreements, the flow of natural gas from Russia to Europe started at 10am. Today, the volume should reach 423.8 million cubic metres of gas.

—Gazprom reserves the right to claim for any damages suffered over the last month, but in respect of the supply and transit contracts and outstanding debts, Gazprom and Ukraine have found a solution to settle the dispute.

—Following the agreement of new contracts, there is no need for the monitoring system to continue. Unfortunately the function of the international monitoring system was not performed in full, with monitors unable to enter Ukraine's underground storage facilities to assess the situation.

—In 2009 the average price paid by Ukraine will be below $250/1000cm , given the falling price of crude oil and oil products. European customers are likely to pay around $280/1000cm. In 2010, the transit rate will increase to a level of around $2.50 per 1000cm per 100km, so Ukraine's transit revenues of Ukraine will increase by about 50%, given the current forecast of natural gas prices.

—Over the period of the dispute Gazprom lost approximately $100m per day as a result of not being able to supply its European customers, but the company believes that a substantial part of these losses will be covered over the coming days and months due the need to refill underground storage facilities and the high level of demand from customers. Gazprom's investment programme has not been affected and projects such as Nord Stream, Shtokman and Yamal will continue as planned.

—The dispute has emphasised the need for South Stream - it is clear that the sooner this diversification of transit routes takes place, the better for Europe. This is not only in respect of political risk, but also technical risk.

20 January 2009

Russian gas supplies to Ukraine resume

Russian gas supplies to Ukraine resume

Today at 05:50 hours Gazprom submitted to the Unified Dispatcher Department (ODU) of Naftogaz Ukrainy the first application for the transit of 99.2 million cubic meters of gas per day through GIS Sudzha, which has been ready for pumping gas and was under operational pressure since January 13.

After the applications of European and Ukrainian customers were specified the second application was submitted to ODU for the delivery towards Ukraine of 423.8 million cubic meters of gas per day (the second application includes the first one). 348.8 million cubic meters are intended for export through all major GIS at the entrance to and exit from Ukraine and 75 million cubic meters for Ukrainian consumers.

At 10:05 hours Ukraine began to transit Russian gas to Europe, which was initially pumped through GIS Sudzha. At 11:10 hours after the second application was agreed with the Ukrainian side gas began to be delivered to Ukrainian consumers through other GIS.

The transit of Russian gas to Europe through the territory of Ukraine and supplies to Ukrainian customers were launched according to the agreements reached by Russian Prime Minister Vladimir Putin and Ukrainian Prime Minister Yulia Timoshenko on the night of January 18. The mentioned agreements envisage the transfer of both countries in their relations in the gas sphere to generally recognized and transparent European pricing rules beginning from 2009.

To implement the reached agreements Gazprom and Naftogaz Ukrainy on January 19 signed in the presence of Russian and Ukrainian prime ministers new long-term separate contracts for the transit of Russian gas to Europe through Ukraine and for gas deliveries to Ukrainian consumers. The contracts envisage no intermediaries between the companies.

The contracts are valid from 2009 to 2018 inclusive.

The transit contract envisages that preferential transit rate of $1.7 for the transportation of 1000 cubic meters per 100 kilometers will remain in place in 2009. The transit through Ukraine will comprise up to 120 billion cubic meters in 2009. From January 1, 2010 the transit tariff will be market-based and will be calculated according to the generally accepted European formula.

According to the contract for gas deliveries to Ukraine, the gas price for Ukrainian consumers has been calculated according to the generally accepted European pricing formula with a 08 decreasing coefficient. Thus, in the first quarter of 2009 the gas price for Ukrainian consumers will comprise $360 per thousand cubic meters. The price will quarterly change. The volume of gas supplied to Ukraine in 2009 will comprise 40 billion cubic meters. From January 1, 2010 Gazprom will begin selling gas to Ukraine at a European market price without discounts.

For the first time the generally accepted European pricing formula, which is acting for all buyers of Russian gas, began to be used in Russian-Ukrainian gas relations. The contract for gas transit through Ukrainian territory and the contract for gas deliveries to Ukrainian consumers have been concluded for 10 years and are independent from each other. All this provides additional guarantees that the situation regarding the transit of gas through Ukraine to European customers will never be repeated.

Ukraine became the last republic of the former Soviet Union, with which Gazprom switched to market-based and absolutely transparent relations in the gas sphere.

19 January 2009

Gazprom and Naftogas Ukrainy sign long-term gas supply deal

Gazprom and Naftogas Ukrainy sign long-term gas supply deal

Gazprom and Naftogas Ukrainy have today signed a 10-year contract for the supply of gas to Ukraine.

Gas deliveries to Ukraine and the transit of Russian gas to Europe will be the subject of two separate contracts which are not linked to each other.

The Russo-Ukrainian agreement excludes all intermediary organizations such as RosUkrEnergo.

Transit will resume as soon as possible.

18 January 2009

Gazprom and Naftogaz preparing to sign a contract for the supply of gas to Ukraine and an agreement on the transit of gas

Gazprom and Naftogaz preparing to sign a contract for the supply of gas to Ukraine and an agreement on the transit of gas

In accordance with the understandings that were reached by the heads of governments of Russia and Ukraine, Gazprom and Naftogaz are currently preparing to sign a contract for the supply of gas for Ukrainian consumers, and an agreement concerning the transit of gas. The main result will be an agreement on the resumption of transit of Russian gas through Ukrainian territory and an agreement on working conditions in the current year and beyond, - said Gazprom spokesman Sergei Kupriyanov.

17 January 2009

Ukraine again refuses to secure Russian gas transit to Europe

Today at 2.00 Moscow time Gazprom sent another request to the Naftogaz Ukrainy United Dispatching Center (ODU) for the transit of 99.2 million cubic meters of gas a day starting from 10.00 via the Sudja gas metering station. From this amount, 13.9 million cubic meters is intended for customers in Moldavia, 63.1 million cubic meters is meant for the Balkans via the Orlovka gas metering station and 22.2 million cubic meters is destined for consumers in Slovakia via the Uzhgorod gas metering station.

The Ukrainian answer was again negative.

16 January 2009

Gazprom Central Dispatch Center

Today Gazprom hosted media representatives at its Central Dispatch Center.

16 January 2009

Gazprom's Deputy CEO Alexander Medvedev explains latest proposal to resolve gas transit issue

Gazprom's Deputy CEO Alexander Medvedev today spoke to international journalists in a conference call:

Gazprom and Eni will form part of an international consortium to buy and own the gas needed for technical purposes (to replace the gas missing from the pipeline system and to fuel the compressor stations); Gaz de France and E.ON Ruhrgas are positively considering entering into the consortium and the invitation to join is extended to all companies that should receive Russian gas supplied via Ukraine.

This innovative solution has been proposed as the latest in a series of attempts by Gazprom to do everything it can to get gas flowing to its European customers. It involves Gazprom and its European partners sharing the financial risk associated with the provision of this significant volume of gas in order to unblock the current impasse, despite the fact that Ukraine has the clear responsibility to provide technical gas.

The paperwork for the consortium is being drawn up as we speak and could be in place very rapidly.

The companies within the consortium would jointly buy the gas at a market rate of around $450 per 1000cm, which is still cheaper than what many of the European customers pay today.

Ukraine's refusal to transit gas to Europe had, up to yesterday, resulted in losses by Gazprom of around $1.1 billion, excluding additional costs associated with the management of the companies upstream production and storage systems as a result of the failure to transit gas to Europe.